Laura WilesThe Insolvency Practitioners Association (IPA) has published its response to the FCA’s MVF redress scheme consultation.
Overall, the IPA supports the scheme, but it urges the FCA to introduce an insolvency protocol following six key recommendations:
- Mandatory insolvency register screening – requiring finance firms to check UK registers before making payments to ensure correct legal entitlement – the IPA’s analysis suggests that without this, the scheme will cost creditors £27m more than it delivers;
- Direct payment to office holders – for current IVAs, PTDs and bankruptcy cases, avoiding incorrect payments to individuals;
- 20% CMC fee cap – extending the PPI precedent to protect creditor returns (saving £7.1 million compared to 30% cap);
- Creating an industry working group – including stakeholders like IPA, the Insolvency Service, the Accountant in Bankruptcy (Scotland’s insolvency service), and R3 (a trade association) to coordinate implementation;
- Introducing a 6-month preparation period before scheme launch – allowing insolvency practitioners to develop systems, train staff and establish processes; and
- Introducing a 24-month claim window for insolvency cases – recognising that investigating historic motor finance across insolvency portfolios takes time.
Following the FCA’s estimate that 14.2m MVF agreements may qualify for redress (approximately 26.3% of UK adults), The IPA has applied the the FCA’s estimate that 14.2m MVF agreements may qualify for redress to the current insolvency population to estimate affected insolvency estates:
- 93,000 individuals in Individual Voluntary Arrangements (IVA) (from 360,000 live IVA cases);
- 6,470 individuals in Protected Trust Deeds (PTD) (from 23,600 live PTD cases in Scotland); and
- 2,000 individuals in bankruptcy (from current bankruptcy population).
Based on the FCA’s estimated average compensation of £700 per claim, this would represent £71m in potential value to insolvency estates.